What debts does a debt agreement cover?

Debt agreements release you from most unsecured debts once you complete your obligations under the agreement. However you may need to pay certain types of debts.

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Unsecured debts

An unsecured debt is not tied to specific property like a house or car.

Debt agreements cover most unsecured debts, such as:

  • credit and store cards
  • unsecured personal loans and pay day loans
  • gas, electricity, phone and internet bills
  • overdrawn bank accounts and unpaid rent
  • medical, legal and accounting fees.

Debts you may be liable to pay include:

  • court fines
  • student loans e.g. HECS/HELP/SFSS
  • victims of crime
  • debts you incur after the date we receive your proposal.

In some cases, a debt agreement does not release you from a debt, even when your obligations are complete. This means the creditor can still pursue you for any debt owing after the agreement ends.

You may need to confirm with the creditor to see whether they can still pursue you for the following debts:

  • debts you incur by fraud
  • child support debts
  • fines, penalties and court-ordered payments
  • overseas debts (this depends on the laws of the country where the debt originated).

The debt comparison table  shows which unsecured debts a debt agreement will cover.

Secured debts

A secured debt is tied to specific property, like a house. The creditor has the right to repossess property you put up as security if you don’t make your repayments. If this occurs you must assist with this recovery action.

Some examples are:

  • mortgage (house is security)
  • car loan (car is security)
  • hire purchase or rent to buy (e.g. furniture or electronics as security).

If a creditor repossesses and sells the goods, it might not cover what you owe them. We call this a ‘shortfall’. A secured creditor can choose to take part in your agreement and receive payments for shortfall amounts you owe.

You must contact your secured creditors to discuss your intentions with the debt. If you’re unable to maintain the payments, you may be able to surrender the goods.

Joint debts

A joint debt is a debt you share with another person. You can include them in an agreement, however a creditor can still pursue the other person for the debt. If both people are in a debt agreement, you should both include the debt in your paperwork.

Tax debts

You can include Australian Taxation Office (ATO) debts in your agreement. However, the ATO can keep your tax refunds if you owe the Commonwealth a debt.